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03/08/2011 10:44 AM

China Releases 12th Five Year Plan

SustainableBusiness.com News

China's new Five Year Plan is a stark contrast from US energy policy, which doesn't exist. The world's two top polluters are taking on this issue very differently.

While in the US, legislation introduced in Congress would prevent the Environmental Protection Agency from controlling emissions, China plans to cut carbon emissions 17% by 2015. It will also implement preferential tax policies to encourage energy conservation and emissions reductions.

And the Industrial and Commercial Bank of China announced that it aims to double lending to strategic energy-saving and emission-reduction sectors in the next 3-5 years (from $93 billion at the end of 2010).

Electric vehicles are cited as a strategic industry in the Plan.

CO2 Scorecard Group says China's record carbon emissions contribute to its undervalued currency, which is subsidizing energy-intensive export industries and negating the nation's conservation efforts.

India, the world's third largest carbon emitter, announced a National Mission for Electric Vehicles in its 2011-12 budget last week. It had earlier announced subsidies for electric vehicles.

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By Deborah Seligsohn and Angel Hsu

The draft of China's much-anticipated 12th Five-Year Plan was released Saturday, March 5 at the opening session of the National People's Congress (NPC). The Plan will actually be brought to a vote at the close of the session later this week. While there may be some changes to the Plan, in past years these have not been large.

The 118-page draft of the 12th Five-Year Plan is not yet available online, but we were able to acquire a hard copy to review. In the meantime, Xinhua provided a summary of the major targets included in the 12th Five-Year Plan. In addition, a number of the key reports delivered at the first day of the NPC are also online in both Chinese and English, and these reports include the Work Report issued by Premier Wen Jiabao. Premier Wen's Work Report includes both an assessment of the previous five years and a summary of highlights of the next Five-Year Plan. Our analysis below is derived from both the initial draft of the 12th Five-Year Plan and the Work Report.

What's notable in the Plan and the Work Report is the prominent position of both climate change and environmental issues, in addition to energy. Indeed, not only is this the first Five-Year Plan that mentions climate change, but it is mentioned at the top of the environmental section.

There is also a full paragraph detailing China's commitment to international cooperation and the UN-led climate negotiation process, including concerns of climate finance and technology transfer. The Plan also discusses the need to implement more climate adaptation-related policies, such as greater preparedness for extreme weather events.

Energy and Climate Targets:

As expected, there are separate targets for energy intensity (16% reduction by 2015) and CO2 emissions per unit GDP (17% reduction by 2015).

These are within the expected range and congruent with the 40-45% reduction in carbon intensity from 2005 levels that was first announced at the Copenhagen talks and reaffirmed in Cancun this past November. Clearly defined and distinct energy and CO2 emissions targets will help ensure provinces implementenergy policies with carbon goals clearly in mind.

Somewhat surprisingly, there was no mention of a total energy consumption target, which was recently announced by China's former Minister in charge of the National Energy Administration, Zhang Guobao . It will be interesting to see whether this emerges in the specific energy-sector plan that will come later this spring.

The goal is to increase forest cover by 12.5 million hectares by 2015. While the goal is mosty in line with the already stated 2020 goal to increase forest cover by 40 million hectares over 2005 levels, the volume stock target seems more ambitious because it seeks to achieve almost half of the 15-year target of 1.3 billion cubic meters by year 2020.

It is not known whether forest cover will be increased by planting plantations, which would not be beneficial to biodiversity recovery.

Tracking Implementation:

To achieve these climate and energy targets, the level of detail and specificity, covering a full range of resource and environmental issues, provided in the Plan and the Work Reports are impressive.

Premier Wen stated that China would put in place "well-equipped statistical and monitoring systems for greenhouse gas emissions, energy conservation and emissions reductions" to ensure these policies are tracked and properly implemented.

Efficiency:

China has had a particularly successful track record on industrial energy efficiency in the previous five years.

In the new Plan, there are new policies to promote greater industrial efficiency, and a major push to include all other sectors of the economy, including new and existing buildings.

For example, the Plan introduces a 10,000 Enterprises Program. While details haven't been released yet, it appears to be a ramp up of the successful Top 1,000 enterprises program.

Following the endorsement of new types of mechanisms in the October Party Plenum Document, the Plan specifically endorses market approaches like energy service companies (ESCOs) that help to finance energy efficiency.

Transport:

While China certainly has plans for additional air and road transport, what is striking is the commitment to rail, both long distance and in urban mass transit.

The Plan includes proposals for construction of 35,000 km of high-speed rail and a goal to connect every city with a population greater than 500,000. There are also plans to improve subway and light rail in cities that already have urban transit systems, building new systems in at least nine other cities, and making plans for six or more cities. We expect to see more detail and perhaps more cities as the sector-specific plan becomes available.

China continues to exceed earlier targets in non-fossil development. For example, the five-year target for wind is 70 GW of additional installation, which exceeds the 2020 target of just a few years ago.

For nuclear, the plan is to install 40 additional gigawatts of capacity by 2015. China currently has around 10 GW of installed nuclear capacity now, which means that if this five-year target is achieved, China is likely to exceed even the expectation of 70 GW by 2020 discussed a year ago. If China achieves these numbers, it will have the world's highest installed capacity of nuclear energy by 2020.

Environment:

The Plan itself does not make clear the specific targets for major environmental pollutants. However, they were all announced at an official NPC-connected press conference.

On March 6, Zhang Ping, Director of the National Development and Reform Commission, stated that the reduction targets for Chemical Oxygen Demand (COD) and Sulfur Dioxide (SO2) are 8%, while ammonia nitrogen and nitrogen oxides are 10%.

Director Zhang also said these targets would be made binding for the first time in the 12th Five-Year Plan, as well as an "index evaluation system" implemented to allocate targets to provinces and ensure they are on track to meet reductions.

We are not clear on exactly how these targets will be made binding, whether there will be additional documents at this NPC, or whether they will be binding in a later sector-specific plan.

While the Plan itself is general on targets, it is much more specific on policies. It assigns specific targets for cities required to reach new motor vehicle emission standards and sets goals for a wide variety of environmental infrastructure, including wastewater and solid waste treatment. There is also a strong emphasis on reuse and recycling, or what the Chinese call "circular economy."

China is a middle-income, developing country and the next five years is when it needs to put in place the infrastructure that will enable it to develop successfully into a high-income developing country and beyond. There's a clear recognition in these plans of the importance of environmental sustainability in being able to reach not just higher levels of income and but also increased welfare of the Chinese people.

The Plan itself is highly specific in some areas but also in others somewhat unclear (for instance, target pollutants). Much of the clarity in implementation comes through sectoral plans and later regulations and guidance. We will continue to track policy implementation as it unfolds.

Deborah Seligsohn is principal advisor of the China Climate and Energy Program for World Resources Institute; and Angel Hsu is a doctoral candidate at the Yale School of Forestry and Environmental Studies. This article was also posted on ChinaFaqs.org.